Why Investors Seek Non-U.S. Stocks During Periods of Deglobalization
Drastic shifts in the dynamic global economy, driven largely by the COVID-19 pandemic, the war in Ukraine, geopolitical turmoil, and supply chain volatility, have eroded global interconnectedness as countries try to insulate themselves and protect against possible financial downturns.
What does this global evolution mean for investors? Deglobalization illustrates the importance of diversifying a portfolio, and one way investors are minimizing portfolio fluctuations is by incorporating non-U.S. stocks into their investment strategy.
Leveraging Non-U.S. and U.S. Stocks to Manage the Effects of Deglobalization
No country is immune to the ongoing unpredictability of the worldwide supply chain, including delayed delivery timelines, material shortages, and other business interruptions. However, companies outside the U.S. can be less susceptible to the transportation-related pressure of deglobalization, like high costs and supply chain fluctuations.
Non-U.S. stocks, especially those in Europe, tend to fare better against an unstable global market because they are able to source materials much closer to home, enabling them to avoid global shipping concerns. Using Non-U.S. stocks to supplement a U.S.-focused investing approach can fill in potential deficiencies during a period of market slowdown.
Three Key Benefits of Owning Non-U.S. Stocks
No one knows how the U.S. and international markets will respond to deglobalization. But incorporating U.S. and non-U.S. stocks into your portfolio can bolster investments against underperformance and help balance risks.
Shields Investors from the Effects of Deglobalization
Across the world, countries are easing their reliance on the global marketplace and prioritizing their own supply chains and financial markets. As economies become less intertwined, it’s likely that we’ll see variable economic cycles, which opens the door for investors to capitalize on global growth opportunities. While countries turn inward to fortify themselves against global turbulence, investors have the chance to look outward and realize the benefits of a geographically expanded investment strategy.
Strengthens a Long-Term Intentional Investing Strategy
A solid long-term investing outlook demands conviction in the face of market fluctuations. While U.S. stocks have delivered strong results over the past several years, it’s crucial to integrate long-term performance considerations into your investment strategy. No market can outperform forever. Finding opportunities for different investments to work in tandem, rather than simply choosing one over the other, can enhance your long-term financial outlook.
Protects Against Corrections and Market Weak Spots
We’ve seen strong short-term returns on technology investments in the U.S., but a market correction in that sector could be on the horizon. Tech companies are coming down from the high of 2021, with recent layoffs and earnings reports falling short of expectations.
While FAANG (Meta, Amazon, Apple, Netflix, and Alphabet) stocks have been a popular, relatively stable source of investment returns, the market is showing slowdown signals. The Federal Reserve’s ongoing rate hikes are also impacting FAANG stocks, delivering a sobering reality check. Riding the highs of overperformance is important but navigating the lows of underperformance can be even more critical.
Portfolio Diversification is a Time-Tested Strategy
A diversified portfolio with allocations across both U.S. and Non-U.S. stocks means that investors don’t have to worry about trying to time the market in an uncertain and ever-changing economic climate. Instead, investors are better positioned to weather the storm of underperformance in any given market.
Important Information
All material of opinion reflects the judgement of Adviser at this time and are subject to change. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services.
The securities identified and described do not represent all of the securities purchased, sold or recommended for CRI Funds, CBIS Global Funds, and Separately Managed Accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Visit our website for a complete list of securities offered during the period.